Blueprint for States to Reject and Replace Obamacare

Here's the blueprint for how the states can reject three central pillars of Obamacare and set the stage for replacing it, if Mitt Romney takes the White House and the GOP takes the Senate this November.

Two reasons compel dismantling Obamacare. First is restoring individual liberty by empowering states against the national government and citizens against both. Second is recognizing that free markets outperform centrally-planned markets, so private-sector healthcare will better serve Americans than government-controlled Obamacare ever could.

However disappointing the Supreme Court's decision to uphold Obamacare's individual mandate in a 5-4 decision, by a separate 7-2 vote the justices opened the door for the states to assert their sovereignty in an equally-unprecedented opportunity. The Court has declared for decades that it's theoretically possible for federal spending to exceed Congress' power under the Spending Clause of the Constitution, thereby violating the Tenth Amendment. That possibility became reality on June 28.

Medicaid is nominally a federal-state "partnership" consuming 20% of state budgets. Obamacare grows Medicaid by an additional $434 billion per decade to cover all Americans up to 138% of the poverty line. The feds promise to pay for 90% of this expansion (though they cannot be held to that), leaving states to pay at least another $50 billion.

If any state declines to participate in the expansion, the Department of Health and Human Services (HHS) could strip that state of 100% of its Medicaid dollars. Every voter in that state would continue funding Medicaid through payroll taxes twice a month, but now would be subsidizing the other 49 states. Rejecting the expansion would thus be a political death wish for any governor or legislature.

This coercion is an unconstitutional violation of state sovereignty, so the Court struck down part of Obamacare's massive Medicaid expansion. The four justices against the individual mandate would have invalidated this entire expansion. While Chief Justice Roberts wouldn't go that far, he was willing to strike down the provision authorizing stripping all Medicaid funds. So now states can refuse to expand Medicaid by foregoing the additional funding.

So first, states must reject the Medicaid expansion. This will leave millions of people subject to the individual mandate unable to get coverage from this government entitlement. Many of those people are exempt from the penalty (tax?) anyway, but others are not. Those people vote heavily Democratic, and they'll surely demand the mandate be amended to exempt them.

Second, states must refuse to create state-based exchanges, which provide heavily-subsidized insurance policies to middle-income Americans not provided healthcare by employers. Because it would violate the Tenth Amendment's anti-commandeering principle to require states to create or run the exchanges, if a state doesn't do it, HHS will directly create and run it.

But there are no tax subsidies if HHS runs an exchange, so no incentive for people to flock to the exchanges; they'd pay full price. While many high-risk individuals would do so, it would still be vastly more expensive. Many will instead choose to pay the penalty (tax?) for violating the individual mandate.

Third, if employers with 50+ employees do not provide federally-approved health care, Obamacare imposes a $2,000 penalty per employee, per year. (Minimum penalty $100,000.) However, that penalty is triggered when those employees receive tax subsidies from a state-based exchange.

Since HHS-run exchanges have no subsidies, for states refuseing to create exchanges, no employer in that state will be subject to that penalty. This means business owners will band together to lobby their state not to set up exchanges.

More than half the states sued to have Obamacare struck down. Presumably most will now pursue their options to decline the Medicaid expansion, not create exchanges, and thereby also save their companies from federal penalties. Medicaid, the exchanges, and the employer mandate are three of the central pillars of the Obamacare system.

This will create an unworkable patchwork nationwide, between states with semi-socialized medicine and healthcare costs spiraling out of control, versus those with private-sector medicine. Expect doctors, insurers, and providers to flock to these friendlier states, creating an increasingly unbalanced system. Then Obamacare will start coming apart at the seams, and momentum will build to repeal and replace.

Former Ohio Treasurer Ken Blackwell and Breitbart News legal contributor Ken Klukowski are on faculty at Liberty University, and explain these issues in Resurgent: How Constitutional Conservatism Can Save America.